The measure of the jolt which has been delivered is that it is probable that judges on the modern High Court would have found a different way in the 1983 Tasmanian Dams case, which in retrospect was perhaps the high water mark, as it were, of Commonwealth constitutional power. The court would probably have held that the power to prevent a state building a dam was not implicit under laws allowing the Commonwealth to legislate for Aborigines, over trading corporations or in foreign affairs.

At the peak of the old doctrine it had become more or less taken as read that any Commonwealth law which began "A corporation shall ... [eat babies]'' or "a corporation shall not ... [kill whales]" was a valid exercise of Commonwealth power to legislate in respect of trading and financial corporations, unless the act in question was otherwise forbidden by the constitution. John Howard's WorkChoices legislation was heavily based on this power, and any reversion to it now would face serious obstacles.

The shift does not represent a movement in the familiar centrism-states-right debate. Overall, the court is by now probably irredeemably centrist. It's about confining governments – states as much as the Commonwealth – to acting within powers clearly given to them. And about creating obstacles which at least slow what sometimes appears to be a perpetual creep towards the accumulation of more government power, stretching further and more deeply into every part of human affairs.

One might think that a conservative, perhaps radically conservative government of the Centre Right, as led by Tony Abbott, would welcome such a philosophical change by the court. I doubt he does. It's irritating, and creates real problems. And it is simply not true that the new-found caution of the courts creates only drafting problems. Abbott wants to be the one to decide which part of government gets smaller, and when (or if) he does, it will be by political not constitutional principles. And some of his ambitions, as well as some of the programs with which he wants to persist, are not clearly authorised by a constitution written nearly 120 years ago.

This week's decision had little, as such, to do with school chaplains. It was more about fundamental constitutional principles. They are being suddenly re-interpreted away from the fairly settled emphasis pioneered by Justice Tony Mason from a time even before he was made a judge of the High Court, and, later Chief Justice. It involved a very expansive idea of Commonwealth power – mostly, but not only, at the expense of the states – based not on explicit powers given to the Commonwealth under the constitutional settlement but on a liberal interpretation of powers said to be implicit in the constitution's grant of executive power to the governor-general and ministers.

The power of the Commonwealth was not limited to the powers over which the Commonwealth was given power to legislate, he argued. It had a right – perhaps sometimes a duty – to do anything and everything that was reasonably capable of being necessary for the national benefit, or to act on a matter of national concern.

Mason, as solicitor-general of the Commonwealth, during the Barwick High Court was arguing that the Commonwealth had a right to enter into fields such as trade practices, regulation of companies, protection of the environment and a host of other areas not explicitly dealt with by the constitution. The argument was pushed further by his successor as solicitor-general, Maurie Byers, to argue a new nationhood of Australia as communications and technology had developed in the later part of the century.

In a different day – at federation in 1901 perhaps – Australia was a collection of six states consisting of six or more markets separated by good distances, with relatively few big players whose activities straddled the whole country. In time, however, developments of rail, roads, and air transport, modern telecommunications, and modern capitalism, meant that the nation became a single marketplace, no longer served by six (or more) separate sets of differing packaging, advertising, health and safety and other laws.

The process of regarding Australia as one market, one nation, or of seeing the benefit of uniform standards of education, healthcare provision, or rules of the road has developed, often with Commonwealth-state co-operation (real or purchased), sometimes by Commonwealth entry into state fields (such as, initially science education, then, generally schools or into developing areas of public concern, such as protection of the environment, Aboriginal affairs, with or without the agreement of the states. Whichever, it has not always been closely founded in the constitutional divisions of powers, unless one adopts the Mason argument.

Constitutional law says that the Commonwealth can spend money only after its expenditure has been authorised by an Act of Parliament. Old doctrine held that Parliament could only authorise expenditure on matters that fell within the province, however generously spelt out, of Commonwealth constitutional power, or matters that were incidental to the exercise of such powers.

This embraced some room for "executive power", but not any sort of right for ministers to lift up their powers by their own bootstraps, simply by declaring that something was a matter of "national concern'', or (like the right to create orders of chivalry) implicit in the very idea of being a nation.

The first warning shot from the modern High Court came at the Rudd government in the 2009 Pape case when a legal academic challenged the one-off payment of up to $900 to taxpayers as a sort of gift. He argued that this "gift" was not authorised by the Commonwealth's constitutional power to make laws about taxation.

He lost that case, but he won an important argument to which the Commonwealth paid too little attention. The court said that Commonwealth power to spend money could not be found simply within the right and duty to appropriate money, but had to be found either from elsewhere in the constitution, or in statutes validly made under it.

The funding of school chaplains might serve as a very good example of ever-expanding government. John Howard thought it a good idea, and perhaps, politically it was.

Indeed the states did not oppose free money or grumble about yet another imposition or interference by Canberra. But no one gave much thought, initially at least, to whether the Commonwealth had the power to do it, or at least to spend money on it. If they did, their focus tended to be on section 116 of the constitution, which forbids the establishment of a state religion, or religious tests for office. That prohibition has already been virtually defined out of existence by the court, and was not the real problem.

The constitution allows the Commonwealth power to legislate for benefits to students, but the Commonwealth initially was all too airy about assuming that it could simply fund the scheme out of its appropriation power.

In Williams (No.1) in 2012, the court reiterated that this was not enough when the power to spend money in this area was not clear. That was a decision which, by implication, threatened the constitutional validity of an array of other legislation, but the Commonwealth treated the decision as a technical hiccup, simply an example of the court being fussy and pedantic. Some amending legislation went through, making clear claims of constitutional authority to legislate and spend money in all of the areas thought to be in potential trouble, including school chaplains.

This week saw Williams (No.2), in which that legislation put under the microscope and found wanting. The court was far from persuaded that a general power to give benefits to students authorised a general program said to be available, if they wanted it, to pupils and the "wider school community", whatever that meant.

The very mention of a wider group of beneficiaries tended to point away from characterising the program as providing benefits "to students", the court said.

"It is enough to observe that all students may use the chaplaincy services provided at a school. For the purposes of argument it may be accepted that some students would derive advantage from using the services and, in that sense, should do so. But no student and no member of the school community must do so. All may; perhaps some should; no one must.''

Benefit, in the constitutional sense, meant more than being of help or use. It implied some sort of material aid, service or commodity.

The court, heretically, gave short shrift to the argument that because the chaplaincy services were provided by – indeed required to be provided by – a corporation, the law could be regarded as being a law with respect to corporations. I have generally agreed with central seizure of power under this theory, but always thought doubtful the proposition which underpinned it.

The mere fact that the Commonwealth had consulted with the states, or that the states acquiesced or agreed with the chaplaincy program, could not operate as a leg-up. Nor could it be assumed that the "executive power" of the Commonwealth had to be interpreted as being exactly the same as the executive power of the British government, as least as at the time of federation. While it might be true in the broad sense that its power embraced everything it needed in order to act as a polity, it had to be understood that Australia had been created as a federation, not a unitary government. Nor did it have a flexible constitution in which Parliament was supreme.

The court did not say, but I expect will in future cases, that the separations of powers which constrain unlimited Commonwealth government embrace more than the division of functions, such as it is, between the Commonwealth and the states. It also embraces the separations within any level of government, between Parliament, the ministry and the judiciary, and – a new and emerging theory – the separation between powers granted to governments (at whatever level) and those powers, rights or things owned by the citizenry and never passed on as something government can control. In a US, with a bill of rights, this might include freedom of speech or the press, or a right to due processs, because there are express restrictions in their constitution forbidding government interference in such fields. Indeed, under the current, mad, US Supreme Court, such rights have been extended to corporations, at least if their directors vote Republican.

Australia does not have, at federal level, a bill of rights and may never do so. But there are rights and restrictions (for example over juries and due process) explicitly in the constitution, and others, such as about political free speech, the High Court has been willing to imply. The High Court under Justice Bob French is a rather more measured and careful court than some of its flashier predecessors, but those who take it for granted do so at their peril.